Music streamer Spotify Technology is in the "sweet spot" of growth and profitability, a Wall Street analyst says. Meanwhile, Spotify stock is in a buy zone.
KeyBanc Capital Markets analyst Justin Patterson reiterated his overweight, or buy, rating on Spotify stock and raised his price target to 490 from 440.
On the stock market today, Spotify stock traded sideways, ending the session down a fraction to 371.69.
"We believe Spotify's product cycle and a moderating competitive landscape support at least 15% annual revenue growth and nearly 15% operating margin by 2026," Patterson said in a client note late Tuesday.
Spotify will report its third-quarter results on Nov. 12.
Patterson expects Spotify to add 5 million premium subscribers in Q3 for a total of 251 million subscribers worldwide. That's in line with consensus estimates.
Including free, advertising-supported customers, Spotify should end the period with 639 million monthly active users, he said. That target is in line with views for an increase of 13 million users.
Spotify Stock Is A Recent Breakout
On Sept. 19, Spotify stock broke out of a six-week consolidation pattern at a buy point of 359.38, according to IBD MarketSurge charts. Since then, it has stayed in or slightly above the 5% buy zone, which extends to 377.35.
Spotify stock ranks second out of 20 stocks in IBD's Computer Software-Education/Media industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 93 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Further, Spotify stock is on the IBD Tech Leaders list.
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